Turning the tools of finance toward saving the planet, and ourselves
A dangerous discrepancy exists between the role nature plays in our lives and the importance we accord it in our economic and political systems. At least half of global GDP is directly dependent on nature. S&P Global estimates that 85% of companies in the S&P Global 1200 directly depend on nature. More than 75% of food crops rely on pollinators, and healthy ecosystems generate 75% of global freshwater, as noted by the World Health Organization. Yet despite this dependence, human activities are driving an unprecedented decline in ecosystems. We are losing species at 1,000 times the natural rate. According to insurer Swiss Re, one-fifth of the world’s countries are at risk of ecosystem collapse.
We are thus rapidly losing the benefits that underpin our wellbeing and economies through critical ecosystem services like pollination, water quality, flood and erosion control, and climate regulation. And we are all interconnected: if the Amazon Rainforest was completely deforested, the impact on weather cycles would reduce Sierra Nevada snowpack by half – a critical water source for Californians and for food supplies across the United States.
But there are other possible futures. These were in sharp focus at a meeting held June 12 at Stanford University by the Natural Capital Project (NatCap). The meeting brought together key representatives from governments and international financial institutions who are driving systemic changes aimed at protecting and restoring nature, in order to better support human wellbeing and livelihoods.
“We are at a tipping point in so many realms, in so many dimensions of how we think about the future, and in our own roles in helping to drive toward a better future,” said NatCap Co-founder and Faculty Director Gretchen Daily. “Yet there is one thing I feel steady and sure about, and that is this community. This is a community that extends around the entire world.”
On June 12 this group included the Prime Minister of Bhutan Lyonchhen Tshering Tobgay, Peter Van Kemseke from the Cabinet of the President of the European Commission, Rafael Dubeux from the Brazilian Ministry of Finance, and Safira Vasquez from Belize’s Ministry of Blue Economy. Together they discussed a vision for integrating nature into global economic frameworks and generating necessary funding; shared many key successes; and paved the way for a new center to scale these approaches toward transformative impact.
Nature finance requires nature data
The lack of sufficient funding for nature protection and restoration has led to the emergence of a wide range of innovative finance mechanisms that leverage the tools of capitalism and finance toward achieving sustainable development. These include payment for ecosystem services, biodiversity credits, blended finance, debt-for-nature swaps, innovative loans, and green or blue bonds, also known as “theme bonds” (see below for brief descriptions and examples of some of these).
Over the past 20 years, NatCap’s approaches and tools for valuing nature’s benefits to people have been foundational to these innovations. NatCap’s tools are helping to set targets and track outcomes for finance mechanisms; because countries must show actual improvements as a result of investments in nature, metrics that track progress are in high demand. As the groups involved in these efforts have expanded to include ministries of finance, central banks, and more, they have changed the conversation, advocating for nature financing that also targets people and livelihoods (i.e., people-positive and nature-positive development and finance).
Examples of nature finance mechanisms
- Biodiversity credits offer credits or certificates for supporting long-term action that improves ecosystems or offset negative impacts. Unlike the carbon market, there is no single metric for measuring biodiversity. One example is the Savimbo biodiversity credit project in the Putumayo region of the Colombian Amazon.
- Green or blue bonds raise capital from “impact investors” to pay for land-based (green) or marine and ocean-based (blue) projects with positive environmental, economic, and climate benefits. Green bonds have historically focused on climate change. In the case of Belize’s Blue Bond, the country restructured a portion of its national debt in exchange for marine conservation commitments. This built on years of collaboration with NatCap; the current phase of work is helping to establish nature- and people-positive metrics of success, as well as monitoring, reporting, and verification processes.
- Innovative loans issued by development banks provide lower interest rates in exchange for nature-positive commitments. As a result of NatCap’s collaborative work in the Bahamas quantifying the ecosystem service benefits from coral reefs, mangroves, and seagrasses and conducting an economic valuation of their marine protected areas, the Inter-American Development Bank granted two innovative loans for nature-based solutions in the Bahamas. NatCap helped develop a baseline so changes in benefits from nature could be documented as loan performance indicators. Read more here.
- Payment for ecosystem services schemes, such as water funds, have been successfully applied around the world. The goal here is to internalize the costs of nature preservation or restoration. The beneficiaries of ecosystem services pay people or groups “upstream” of them – sometimes literally – for maintaining the integrity of those ecosystems. As an example: through modeling the potential environmental and economic benefits, NatCap’s analyses supported the first water fund in Africa, the Upper Tana-Nairobi Water Fund, benefiting farmers and the more than 9 million who rely on the Tana River for freshwater. Read more on NatCap’s role here.
Transforming a vicious cycle into a virtuous one
At the June 12 meeting, the EU’s Van Kemseke highlighted the linkages between nature and climate: climate change accelerates the loss of biodiversity and nature, which in turn speeds the process of climate change. Yet when allowed to thrive, nature is a key solution in slowing and reversing climate change. These connections are being given more attention now, in the lead-up to COP30 (the UN Climate Change Conference to be held in November 2025 in Brazil).
"As policymakers we need to help move us away from this vicious circle and transform it into a virtuous circle," said Van Kemseke. He also announced that the EU will be launching nature/biodiversity credits soon – noting this was in part influenced by NatCap's work – while remaining committed to other types of public sector support for nature as well.
“If industrialization benefits humanity but not the planet, then it is at the expense of our own future,” Prime Minister Tobgay of Bhutan said, also urging that programs like the EU’s forthcoming nature credits must incentivize the preservation of existing nature, not just restoration and new growth. Bhutan, which has 70% forest cover and absorbs more carbon than it produces, updates a Gross National Happiness index every five years that strives to balance economic growth with social and environmental wellbeing. Prime Minister Tobgay said this should also explicitly measure natural capital.
Zhiyun Ouyang, director of the Chinese Academy of Science’s Center for Ecosystem Valuation and Accounting, also shared China’s extensive progress implementing Gross Ecosystem Product, a complement to Gross Domestic Product co-developed as part of their collaboration with NatCap and approved in 2021 by the UN Statistical Commission.
Dubeux, Vice Minister of Finance for the Ecological Transformation, shared several of Brazil’s major efforts leading up to hosting COP30, including its Ecological Transformation Plan and the Tropical Forest Forever Facility. It also intends to provide financial resources for Indigenous and local communities that conserve tropical rainforests (read more about scaling nature finance in Brazil here).
Making nature finance work for people, too
Vasquez shared Belize’s most recent work with NatCap advancing metrics of success and monitoring approaches that explicitly target both people and nature. “Traditionally, we might look at environmental indicators and see what we are protecting, but we don’t see how it impacts the lives of our people,” she emphasized. “Developing socioeconomic KPIs [key performance indicators] shows the true impact of conservation: how many jobs is it creating, how is it contributing to food security and economic diversification, and how is it creating social equity including for women and youths? How are they being positively impacted, not just in the future, but now? Once you’re able to see this, it will have a greater impact – people become even greater stewards and we can scale up what we are doing.”
Shifting the development paradigm
Because multilateral development banks understand their investments in human development are at risk from climate change and nature loss, many have committed to nature-positive development that supports ecosystem recovery. The Inter-American Development Bank (IDB) recently embedded nature and biodiversity in its institutional strategy. Gregory Watson, head of IDB’s Biodiversity and Natural Capital Unit, spoke at the Stanford event, as did Qingfeng Zhang, Senior Director of the Agriculture, Food, Nature, and Rural Development Sector Office at the Asian Development Bank (ADB) and Albert Park, Chief Economist in the Economic Research and Regional Cooperation Department at ADB.
“We are at a historic critical juncture,” said Park. “We know the value of nature is rising very fast, because ecosystems are becoming more stressed and more scarce… Our purpose in this area is also to build a whole system to promote financial development for nature.”
Shaping a new mechanism for scaling impact
NatCap Executive Director Mary Ruckelshaus and Senior Fellow Adam Wang-Levine also shared plans for a new Technical Assistance Center to help countries and international financial institutions take up natural capital approaches more quickly.
“The exciting opportunities advanced by this group of leaders are designing and guiding the implementation of finance instruments to achieve the dual goals of improving nature and human prosperity,” said Ruckelshaus. The team described their vision for providing greater knowledge brokering, capacity development, and technical support and tools through the new center: “Now, at Stanford, we are codifying the work of 20 years, and turning it into the machinery to accelerate impact.”
This year, NatCap Faculty Director Daily was appointed co-chair of the World Economic Forum’s Global Future Council on Natural Capital, part of the Forum’s recently launched initiative to mainstream natural capital in the global socioeconomic agenda and rapidly scale its application in decision-making. A recent post written by members of the council stated, of natural capital innovations around the world: “These are not isolated experiments – they represent a new economic logic.”
The different sectors and leaders in attendance on June 12 are all pieces of the puzzle, aligning around one shared vision: development can no longer come at the expense of nature – for in so many cases, human prosperity depends on wise stewardship of healthy ecosystems. The wide-ranging efforts discussed at the meeting help illuminate the value of our natural ecosystems, showing that development can benefit both people and nature, and they are changing financial incentives to scale up and ignite a transformation in our economic and financial systems and ways of thinking.
The Natural Capital Project is based out of the Woods Institute for the Environment in the Stanford Doerr School of Sustainability and the Department of Biology in the Stanford School of Humanities and Sciences.
Media contact: Elana Kimbrell, elanak@stanford.edu
